Considering crafty Keneally’s cost-of-living kindness

Apologies for the bad alliteration.

At the NSW Labor election campaign launch, Kristina Keneally announced the Fairness for Families pre-election gift, a package promoted as addressing the cost-of-living stresses faced by NSW households.

In the run up to an election though, we should be particularly wary of such announcements. Is this package well designed policy targeting real stresses, or a $250 bribe to most households across the state?

I have already addressed one of the measures in this earlier post. Namely, insulating households from the costs of the badly devised feed-in tariff scheme. Other measures announced include:

  • Increasing the existing $161 Energy Rebate to $250
  • Extending eligibility for the rebate to all households with an income under $150,000
  • Capping public transport fare increases to CPI
  • Limiting other cost increases, including fishing licences, motor registration and stamp duty.

First cab off the rank, I commend the increase to the Energy Rebate to $250. Available to Commonwealth Health Care Card holders, this currently covers pensioners, people in unemployment, students and some working poor households. These are exactly the households facing the most pain from rising energy bills due to their low discretionary income, and this increase is well targeted. Three cheers from me.

A family with one kid earning a combined income under $79,826, or an aged pensioner (income $34,237) will now be $89 better off each year. If you don’t think that’s a lot of money per year, that’s why you don’t need the money.

Unfortunately, this announcement also came with an extension of the eligibility of the rebate to all households with an income under $150,000. I am not enamored with this part of the proposal as it is clearly a sop to middle class voters. Newly eligible households will be $250 a year better off under this change. A childless couple each earning $74,000 (combined $148,000), for example.

Most households in NSW will be eligible for the expanded Energy Rebate. Including my own. And we had the financial freedom to fly to Auckland to catch a music festival, even though the same festival also played in Sydney. And Melbourne. Or even Brisbane. Just sayin’.

Low-income households $89 better off per year, middle-income DINKs $250 better of per year. Yep, middle class welfare.

I could understand there may be a need to further increase the eligibility of the Energy Rebate, however the rate they settled on gives away the Labor bribery game completely.

The other measures relate to capping public transport fees and other taxes and charges. I’ll focus on transport, but the principle will go across all these measures. Again, if the aim of the policy is to ease cost-of-living pressure, it will be targeted. Alas, no.

The way that fares are currently set out, the Government and service users each pay a fixed percentage of costs, with IPART tasked with crunching the formulas and thus setting the fares. The problem is, costs of service delivery are rising and when you ask service users to pay a smaller percentage, you require the Government (ie all tax payers) to fund the difference. This might be acceptable if it was the most efficient way to resolving equity and access issues created by rising fares.

But there is an existing concession framework that could be more effectively designed to meet this challenge. It is difficult to measure people’s incomes at the ticket booth, but again the Commonwealth Health Care Card would provide an administratively simple cut-in rate for expanded concessions, and the concession rates could be adjusted to meet need / budgetary constraints.

There is some much-needed relief for low-income households in this package, but there is also a whole lot of very expensive middle class welfare bribery going on. The challenge is to cut through to the essential bits, and encourage the ‘Government in waiting’ to match them.

Edit: Ok, I admit that I broke my SMH strike. But today they have published the claim that the expanded eligibility for the Energy Rebate (combined household income under $150,000) will reach 2.38 million of the 2.84 million households in NSW. Around 84% of all households. Yes, pretty much everyone.

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